The Central Bank of Iceland published its latest survey of market expectations, indicating that inflation expectations are broadly unchanged since August and that respondents expect inflation to decline in the near term while policy easing begins in early 2026. A marked shift in sentiment on policy settings accompanied the rate path, with a large majority now judging the monetary stance to be too tight. The survey covered 3-5 November, with 30 responses from 38 invited bond market participants (a 79% response ratio). The median respondent expects inflation of 3.4% in one year, 3% in two years, and 3% on average over the next five and ten years, and anticipates króna depreciation with the EURISK exchange rate at 149.5 in one year. The median policy rate expectation is 7.5% in Q4/2025, falling to 7% by end-Q1/2026 and 6.25% by end-2026, while the two-year-ahead expectation is unchanged at 5.75%; 83% of respondents consider policy too tight (up from 43% in August) and none consider it too loose. Two-thirds cited reduced pension fund demand for foreign currency as a key driver of the króna’s 2025 appreciation, alongside references to strong exports (especially tourism) and increased non-resident investment inflows.
Central Bank of Iceland 2025-11-12
Central Bank of Iceland survey shows inflation expected at 3.4% in a year and key rate seen falling to 6.25% by end-2026
The Central Bank of Iceland's latest survey reveals unchanged inflation expectations since August, with a forecasted decline in the near term and policy easing anticipated in early 2026. Conducted from 3-5 November with a 79% response rate, it shows a median inflation expectation of 3.4% in one year and a policy rate expectation of 7.5% in Q4/2025, decreasing to 6.25% by end-2026, while 83% of respondents view the current monetary stance as too tight.